As some countries around the world start to relax physical distancing and lockdown regulations, the IWSR has found that consumers are still proceeding with caution. The industry, especially the on-premise, will need to keep in mind that consumers are not guaranteed to revert to their pre-crisis behaviour.
China is perhaps one of the most relevant market to look at right now. It was the first country to initiate restrictions on movement, and amongst the first to ease them. The lockdown of Hubei province, where the virus is believed to have originated, was imposed in mid-January 2020, and ended in early April. During that period, the province, made up of 57m inhabitants, was shut off from the rest of China. In other parts of the country, restrictions have gradually eased from late March with factories, non-essential shops and some on-premise re-opening. Some spaces, such as cinemas and nightclubs are still closed. Restaurants and bars are gradually opening, while gyms opened briefly before being shut again.
Even as restaurants and bars slowly start to open across China, there are signs that easing restrictions has not been met with overwhelming enthusiasm, and consumers have been slow to return to the on-premise. Although some initial restrictions were put in place for the on-premise, such as plastic screens, distancing and temperature measurement, these are increasingly being relaxed. The government is also offering consumption vouchers and has tried to assure the public that restaurant visits are safe through PR campaigns. While there are no limits on group size, the culturally popular tradition of hosting large banquets is not yet taking place.
“A return of both the night trade (drinking occasions without food) and large banquets is likely needed to boost alcohol consumption back to pre-crisis levels. While the night trade still suffers from official restrictions, the lack of banquets may indicate that consumers are not yet in a celebratory mood,” remarks Tommy Keeling, IWSR’s Research Director for the Asia-Pacific region. The night trade also poses the biggest questions – soon after restrictions were lifted and some high-energy bars in Shanghai and Beijing were opened, operators found that social distancing was extremely hard to control in a bar environment, where crowds are core to the concept. Bars were once again shut.
The government is also advocating to suppress the sharing of dishes in restaurants, which is core to consumption tradition. “This may well suppress a wholesale return to eating out, and by extension, drinking out. If similar restrictions are applied to other on-premise formats elsewhere, and consumers are unable to participate in social rituals, the return of the on-premise may well be suppressed,” notes Keeling.
As consumers in China ease out of their lockdowns, the announced partial reopening of the on-premise in Spain and Italy’s Calabria region will be the first test in Western countries to see how consumers react.
In Spain, the opening of the on-premise will initially be restricted to outside spaces while maintaining social distancing and limiting capacity to 30%. Given the practical difficulty of implementing such regulations for many restaurants and bars, sales are likely to remain limited at first. Theatres may also be allowed to restart, again with a 30% restriction, perhaps providing some traffic to inner city night trade.
Even as consumers may be slow to go back to their pre-pandemic consumption habits, the gradual re-opening of the on-premise is the step needed to give brand owners and their distributors a path forward. Limiting the on-premise to initially only offer outdoor activities is a careful policy decision that operators will need considerable help with. The beverage alcohol sector is ideally placed in assisting outlets in their endeavour. Although favourable payment terms would help, on-premise operators will also need outdoor furniture, cooling equipment, glass and plasticware, awnings and parasols, physical dividers, protective gear and cleaning supplies.
It is sure that international politics, as well as the alcohol industry, will follow developments in Spain and Calabria very closely – if the reopening appears to be a success it may well serve as a blueprint for other countries opening up their Horeca sector.
The findings from this article are based on IWSR’s report series examining the impact of Covid-19 on 10 key markets. This report series is updated every two weeks, in order to help the beverage alcohol industry stay on the pulse of the impact of the pandemic around the world.
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